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Historical Perspective: Durable Goods Orders.

  • Written by Syndicated Publisher No Comments Comments
    August 25, 2011

    The August Advance Report on July Durable Goods was released this morning by the Census Bureau. Here is the summary on new orders:

    New orders for manufactured durable goods in July increased $7.7 billion or 4.0 percent to $201.5 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 1.3 percent June decrease. Excluding transportation, new orders increased 0.7 percent. Excluding defense, new orders increased 4.8 percent.

    Transportation equipment, also up two of the last three months, had the largest increase, $6.7 billion or 14.6 percent to $53.0 billion. This was led by nondefense aircraft and parts which increased $3.2 billion.
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    The report came in stronger than the Briefing.com consensus estimate of 1.9 percent. Likewise the ex transportation number exceed the consensus forecast of -0.5 percent.

    The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two. However, at this point, the correction in the market has not been accompanied by a contraction in goods orders in the latest report.

     

     

    An overlay with unemployment also shows some correlation with unemployment (inverted). We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession. We’ll want to keep an eye on this correlation in the months ahead.

     

     

    An overlay with GDP shows some disconnect in recent quarters between the recovery in new orders and the general decline in GDP — yet another comparison we’ll want to watch closely.

     

     

    The next chart shows the percent change in orders with and without transportation (namely vehicle orders) since the turn of the century.

     

     

    Now let’s exclude defense orders.

     

     

    And finally, let’s look at core durable goods orders, excluding both Transportation and Defense.

     

    The durable goods orders series is one of the more important indicators of the economy’s health.Durable Goods Orders.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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